Oil prices leap on Greek crisis hopes

November 04, 2011 | 08:51

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Oil prices rallied Thursday as the Group of 20 major economies tackled the eurozone debt crisis and signs that Greece would abandon a referendum plan on its latest rescue.

New York's main contract, light sweet crude for delivery in December, jumped $1.56 to close at $94.07 a barrel.

In London, Brent North Sea crude for December delivery settled at $110.83, a rise of $1.49 from Wednesday's closing level.

Markets were tracking a two-day G20 summit that opened in the French resort of Cannes, where the leaders of the world's most powerful economies were attempting to strong-arm Greece into abiding by the terms of its latest rescue deal.

Greek Prime Minister George Papandreou triggered market turmoil this week when he announced Monday that Athens would put the European Union rescue package agreed only last week to a referendum.

Papandreou -- facing a confidence vote in parliament Friday -- said Thursday he was prepared to drop plans for the referendum, easing fears of a Greek debt default that could rip through the eurozone.

Market sentiment was also lifted by an unexpected interest rate cut by the European Central Bank, which lowered a key rate to 1.25 per cent, from 1.50 per cent.

The new ECB chief, Mario Draghi, surprised markets with a rate cut at his first policy-setting meeting, citing "high uncertainty" and "intensified downside risks" for the 17-nation eurozone economy.

"What a starter! Super Mario is jumping ahead of the curve," said ING Belgium senior economist, Carsten Brzeski.

"It is obvious that the ECB has caught the crisis virus and is trying everything it can to prevent a full-fledged recession," the analyst said.

AFP

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